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December 3, 2009

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EU sets financial oversight deadline

EUROPEAN Union finance ministers sought to nail down an agreement on new financial oversight agencies yesterday but faced resistance from Britain, which is worried these may overrule national regulators.

Swedish Finance Minister Anders Borg, whose country now holds the EU presidency, said the time had come to make a deal.

He told reporters the EU leaders had given their finance ministers until December 31 to approve new EU banking, insurance and financial market regulatory systems as well as a European Systemic Risk Board to watch out for major potential threats to the economy.

Britain is worried that EU-wide oversight will erode national regulators' powers, but Borg said an EU deal was important to show Europe has learned the right lessons from the financial crisis.

Wouter Bos, the Dutch finance minister, said EU nations had not yet resolved whether the new agencies could overrule national regulators when they failed to agree how to tackle problems involving financial companies operating in different countries.

France's Christine Lagarde said Britain would prefer to limit the powers of the new authorities.

On Tuesday, the 16 nations that use the euro set deadlines for most of them to reduce budget deficits that are well above the EU budget rules that underpin their currency.

It is the first major step most of the eurozone countries are making toward paying off the massive debt built up by spending billions of euros rescuing banks and paying welfare to the growing number of the unemployed during the economic downturn.

The move would also come just days after Dubai's announcement that it is having trouble handling its debt shook financial markets and raised concerns about other heavily indebted economies, such as Greece.

EU officials tried to cool worries over Greece's ballooning debt and deficit. Luxembourg Prime Minister Jean-Claude Juncker said Greece "is not and will not be in a state of bankruptcy."

But eurozone nations are clearly worried, telling Greece that it needs to do more to reduce a deficit that is expected to hit 12.5 percent of gross domestic product this year.


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